COURT FILE NO.: CV-13-1009900CL
DATE: 20151001
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Robin Boys and Gerald Groskopf
Applicants
– and –
Shoppers Drug Mart Inc.
Respondent
Clio Godkewitsch and Demitrios Yiokaris, for the Applicants
Alan B. Merskey and John M. Picone, for the Respondent
HEARD: September 15, 2015
Penny j.
[1] This is an application for an order declaring that the applicants are entitled to receive supplementary pension benefits under the Shoppers supplementary pension benefit plan and for an order requiring Shoppers to pay those supplementary pension benefits to the applicants. The applicants also seek an order that, in any event of the cause, their costs of this litigation should be paid out of the pension fund.
[2] The issue in controversy arises from the interaction of the Shoppers registered pension plan and the supplementary pension plan. This issue is complicated by the fact that, following the divestiture of Shoppers by Imasco in 2000, there were significant employee terminations (including the applicants) which resulted in an order of the Financial Services Commission of Ontario declaring a partial wind up of the Shoppers pension plan. This had the result of triggering certain “grow in” benefits for the applicants under s. 74 of the Pension Benefits Act.
[3] Whether the applicants are entitled to supplementary pension benefits turns on the interpretation and application of s. 2.24 of the Supplementary Plan. Section 2.24 sets out what a supplementary pension benefit means. In simple terms it consists of three parts:
(i) the full amount of the participant’s pension benefit under the registered pension plan determined without regard to the Income Tax Act limits[^1] on pension benefits payable under registered plans (s. 2.24(a)); less
(ii) the total pension benefit actually earned under the registered plan (i.e., the amount payable after application of the Income Tax Act limits) (s. 2.24(c); with the proviso that
(iii) the full amount of the pension benefit described in s. 2.24(a) (part (i) above) “shall not be subject to any grow in provisions as provided for in applicable provincial pension legislation” (in Ontario, s. 74 of the Pension Benefits Act).
[4] The parties agree on the values of the pension benefits actually earned by the applicants under s. 2.24(c) (part (ii) of the test above). They also agreed that the value for the total pension benefit without the Income Tax Act limit under s. 2.24(a) (part (i) above) must not include any grow in benefits under s. 74 of the Pension Benefits Act.
[5] The parties disagree, however, about how to implement the part (iii) “no grow in” proviso. As a result, they also disagree about how to calculate the total pension benefit used as the starting point of the supplemental pension benefit equation in s. 2.24(a) (part (i) of the test).
[6] In mathematical terminology, the total pension benefit excluding the Income Tax Act limit and any grow in benefits (s. 2.24(a)) is the “minuend.” The total pension benefit “earned” including the Income Tax Act limit and any grow in benefits (s. 2.24(c)) is the “subtrahend.” The “difference” when the subtrahend is subtracted from the minuend is the amount of supplementary pension benefit payable to the retired employee.
[7] Shoppers takes the position that when the grow in benefits acquired by the applicants by virtue of s. 74 of the Pension Benefits Act are excluded from the starting point (s. 2.24(a)), it is less than the pension benefits actually earned by the applicants (s. 2.24(c)). Accordingly, Shoppers argues that there is no “difference” and therefore no supplementary pension benefit is payable.
[8] The applicants take the position that the pension reduction employed by Shoppers as a means of excluding the effect of provincial grow in rights in its calculation of the starting point is not authorized or contemplated by the Supplementary Plan and that, without that reduction, their full pensions under s. 2.24(a) exceed the amounts actually paid (s. 2.24(c)) such that a supplementary pension is payable.
[9] For the reasons that follow, the relief sought by the applicants is dismissed.
Employment and Pension Plan Background
[10] I accept and adopt the following background facts, largely taken from the Applicants’ factum.
Employment
[11] Prior to February 4, 2000, the applicants were employed by Imasco and participated in the Imasco pension plan and the Imasco supplementary pension plan. The applicants’ employment contracts were assumed by Shoppers effective February 4, 2000. On that day, the applicants terminated their participation in the Imasco pension plan and joined the Shoppers registered plan.
[12] However, unlike the process adopted for the registered plans, all of the assets and liabilities (including accrued service) under the Imasco supplementary pension plan were transferred to the Shoppers supplementary pension plan to avoid accruals and payments under two different supplementary pension plans.
[13] Mr. Boys’ employment with Shoppers was terminated on February 11, 2000, one week after his employment was transferred from Imasco. He had .0219 years of service in the Shoppers Plan and 16.7616 years of service in the Imasco plan and the Supplementary Plan.
[14] Mr. Groskopf’s employment was terminated by Shoppers on October 26, 2004. He had 4.7315 years of service in the Shoppers Plan and 22.6027 years of service in the Imasco plan and the Supplementary Plan.
The Shoppers Plan
[15] The Shoppers Plan is a single-employer contributory defined benefit pension plan registered in the province of Ontario. Shoppers is the pension plan sponsor and administrator.
[16] The normal retirement date under the Shoppers Plan is the last day of the month in which the member turns 65. A member’s monthly benefit on retirement is roughly equal to 2% of his best average earnings (over a period of three years of employment) multiplied by his years of credited service.
[17] A member may retire as early as age 55 as long as she has completed two years of continuous service. Where a member retires early, her monthly benefit is reduced by an “early retirement factor.” If the member has attained certain age and/or service thresholds, no early retirement factor will apply. At the time of their terminations, however, neither of the applicants had met any of these thresholds and neither was, therefore, eligible for an early, unreduced pension.
The Supplementary Plan
[18] Pension benefits under the Shoppers Plan are payable up to the maximum amount permitted by the Income Tax Act for a registered pension plan. Conceptually, therefore, the Supplementary Plan was created to provide for those remaining pension entitlements under the Shoppers registered plan which fell above the maximum Income Tax Act limit.
[19] Section 1.1 of the Supplementary Plan provides:
The plan is hereby established to provide certain employees supplemental pension benefits that exceed the Income Tax Act limits on pensions payable under registered pension plans, or certain other supplemental pension benefits, on the terms and conditions described.
[20] Shoppers created a trust effective February 4, 2000 to hold the assets of the Supplementary Plan. Shoppers has the right to interpret the Supplementary Plan and to amend and discontinue it. Shoppers also has the ongoing obligation to fund and protect member benefits until paid in full. Accordingly, each year, Shoppers contributes an amount to the Supplementary Plan that will fully fund the benefits that accrued to members as of December 31 of the prior year.
[21] Section 3.1 of the Supplementary Plan sets out a participant’s entitlement to a supplementary pension benefit and the timing of payments from the Supplementary Plan, which are essentially tied to the individual’s pension benefit payable from the registered plans. Thus, if a member is entitled to a supplementary pension benefit, it must be paid commencing at the same time as his registered pension benefits. Similarly, if the registered pension benefit is paid in periodic payments, so must be the supplementary benefit; and if the member’s pension benefit is paid in a lump sum, so must be his supplementary benefit.
[22] As noted above, s. 2.24 contains the method of calculating the amount of any supplemental pension benefit. It provides, in relevant part:
Supplemental Pension Benefit at any time of a Participant means, for an individual who is a member of the Executive Plan:
(a) the full amount of the Participant’s pension benefit, if any, determined at that time in accordance with the Executive Registered Plan, but without regard to: (i) the 35-year limit on Pensionable Service (as defined in the Executive Registered Plan); and (ii) Income Tax Act limits on pension benefits payable under registered pension plans.
Furthermore, for purposes of the Plan and notwithstanding the provisions of the Executive Registered Plan, the Accrued Pension (as defined in the Executive Registered Plan) at that time for a Participant who joined the ICPP on or after January 1, 1990, but before January 1, 1995, shall be calculated as 2% of the Participant’s Final Average Remuneration (as defined in the Executive Registered Plan) at that time multiplied by the Participant’s Pensionable Service at that time.
(b) PLUS any other pension benefit that may be granted to the Participant, or recognized for the purposes of the Plan, by the Employer, including under a Severance Agreement, if applicable;
provided that, notwithstanding any other provisions of this section 2.24, the sum of the amounts determined under section 2.24(a) and section 2.24(b) shall not exceed 70% of the Participant’s remuneration (as defined in the Executive Registered Plan) during the last 12 months of the Participant’s Continuous Service (as defined in the Executive Plan);
(c) LESS the total pension benefit earned by the Participant under the Executive Registered Plan and the ICPP and any other pension plan of the Company or its Affiliates or its subsidiaries that is registered in Canada or qualified elsewhere…
Notwithstanding anything to the contrary in the Plan, the amount of pension benefit described in sections 2.24(a) and 2.24(b) above shall not be subject to any grow-in provisions as provided for in applicable provincial legislation…
Partial Wind Up
[23] The applicants’ terminations were part of a broader corporate restructuring. In 2005, the Financial Services Commission of Ontario issued a notice announcing its intention to order a partial wind up of the Shoppers registered plan with respect to the employees who lost their jobs due to the reorganization. Ultimately, effective April 22, 2005, Shoppers agreed to declare a partial wind up of the Shoppers registered plan for members who were terminated between January 1, 2000 and October 26, 2004. Both applicants were included in the partial wind up of the Shoppers Plan.
[24] As a result of their inclusion in the partial wind up of the Shoppers Plan, and the fact that their ages plus years of membership equaled at least 55, both applicants were covered by the grow in provisions of what was then s. 74(1) of the Pension Benefits Act.
[25] Section 74 allows members to grow into their registered pensions at the earliest date on which the member would have been entitled to receive an unreduced pension, calculated as if the employee continued to accrue service in the plan up to that date. Where the grow in rules apply, the amount of an employee’s monthly pension is calculated using the employee’s credited service earned and salary in effect at the wind up date, but with the added enhancement that the monthly pension amount may commence in pay at their earliest unreduced pension retirement date.
[26] Mr. Gorham, an actuary retained by the applicants, described it thus:
Grow-in can be described as recognizing that a member included in the partial plan wind up was unilaterally denied the ability to continue to work and to earn the right to certain ancillary benefits, the major one of which is more generous early retirement benefits. A member who qualifies for grow-in (the sum of age and service total at least 55) has early retirement benefits determined as if the member would have continued to work up to the date that provides the best value and to then start the pension.
(a) First, the start date for the pension (the early retirement date) that provides the greatest commuted value is determined;
(b) Then the amount of pension is determined by applying the reduction factors that would be appropriate for a person retiring on that date from active employment.
Based on the terms of the [Shoppers Plan], grow-in can provide a significant increase in the value of the pension.
The effect of restricting recognition of grow-in for Section 2.24(a) is to reduce the Supplementary Plan benefit by some or all of the value that is given to the member under the [Shoppers Plan] and [Imasco plan] through the statutory grow-in provision.
[27] In this case, the earliest unreduced pension retirement date for both applicants was age 55. In other words, the benefit conferred under s. 74 of the Pension Benefits Act entitled both applicants to start receiving their unreduced pensions as of age 55 because, if they had both worked at Shoppers to that age, they would have met the eligibility criteria to receive their pensions without the reduction factors being applied.
[28] Thus, the effect of grow in in this case was to confer on the applicants a very material financial benefit. The consequence of being entitled to the benefit of provincially legislated grow in rights was to lower the age of eligibility for an unreduced pension from the normal retirement age of 65, to age 55 – an additional ten years. There is no dispute that the present value of their pension entitlements as a result of grow in conferred a benefit on the applicants of over $100,000 in each case.
[29] According to the applicants, one way of looking at it is that grow in does not increase the monthly amount of the pension; it advances the age of eligibility for payment of an unreduced pension, in the case of both applicants here, to age 55. I pause here to note, however, as will be discussed in more detail below, that grow in actually does have the effect of increasing the monthly amount of a member’s pension because it transforms what would otherwise have been a reduced pension payable upon early retirement into an unreduced pension. That is precisely what happened in this case.
[30] In 2009, Shoppers gave notice to the members of the Shoppers registered plan affected by the partial wind up of their entitlements under the Shoppers registered plan and options available to them.
[31] The notice sent to Boys contained the following summary of pension entitlement:
Before Partial Wind Up
After Partial Wind Up
Executive Plan
$131
$47,682
ITCPP
$84,972
$142,349
Supplementary Plan
$36,637
$0
Total Lump Sum
$121,740
$190,031
[32] Groskopf’s pension statement contained his summary of pension entitlement:
Before Partial Wind Up
After Partial Wind Up
Executive Plan
$73,289
$192,629
ITCPP
$211,467
$321,580
Supplementary Plan
$52,650
$0
Total Lump Sum
$337,406
$514,209
[33] As can be seen from these statement summaries, the total lump sum value of both applicants’ entitlements under the Shoppers (and Imasco) registered plans increased significantly as a result of the recalculation, after the partial wind up, to reflect their “grow in” entitlements to receive pensions as of their earliest, unreduced pension eligibility date. Their Supplementary Plan entitlements, however, correspondingly decreased to zero.
[34] The explanation for this result, unfortunately, appears to have been a long time coming. The applicants requested the underlying calculation data but received no response. Ultimately, in December 2013, Newbould J. ordered Shoppers to produce the calculations used to determine the amounts set out in the pension information statements which were provided to the applicants. This information was delivered in January 2014. There were a series of follow-up questions from the applicants’ counsel which generated additional responses from Shoppers’ actuaries, Towers Watson. These were also provided in January 2014. In April 2014 Wilton-Siegel J. adjourned the application so that the applicants could obtain actuarial advice. During a scheduling conference on November 20, 2014, Wilton-Siegel J. also, on his own motion, requested that Shoppers provide additional calculations, specifically:
(1) what the applicants’ total monthly pension payment would have been had they requested a pension at age 55 without the benefit of grow-in? and
(2) what total monthly amounts the applicants became entitled to as a result of grow-in?
The Shoppers Calculations
[35] Boys’ original termination statement from Shoppers in 2000 (that is, pre-partial wind up) showed a pension from the Imasco plan, payable at age 65, of $2,405.60, a pension from the Shoppers Plan of $3.14 and a Supplementary Plan benefit of $880.02. Boys was given the option of receiving his Shoppers pension by way of lump sum valued at $110.89. Boys elected to receive, and was paid, a lump sum in 2002 in respect of his Shoppers Plan benefit. He otherwise received his pension benefit paid monthly.
[36] Post-partial wind up, Boys received a recalculated statement and election of benefits as at normal retirement date of 65. That statement reflects Boys’ prior election of a lump sum payment for the Shoppers Plan benefit and recalculates the lump sum payable. As noted above, the value of Boys’ registered pension benefits increased by about $105,000 as a result of the grow in associated with the partial wind up but his Supplementary Plan lump sum benefit went down to zero, for a net increase to the value of Boys’ pension of $68,291, without interest.
[37] Groskopf’s original termination statement from Shoppers in 2004 (also pre-partial wind up) showed a pension benefit payable at age 65 from Imasco of $2,560.60, a benefit from the Shoppers Plan of $892.59 and a supplementary benefit from the Supplementary Plan of $641.23. Groskopf had the option of receiving his Shoppers Plan benefit by way of lump sum valued at $74,140.82. Groskopf ultimately elected to receive his pension benefit by way of lump sum.
[38] Post-partial wind up, Groskopf received a recalculated statement and election of benefits as at the normal retirement date of 65. It too, on this assumption, reflects essentially the same amounts payable from the Imasco plan and the Shoppers Plan. However, the lump sum values, as noted above, reflect an increase in lump sum value of the registered plans of about $230,000. There is also a reduction of the Supplementary Plan benefit to zero, for a net increase in the lump sum value of Groskopf’s pension of $176,803.
[39] It is common ground that the increases in lump sum value of the registered pensions of both applicants following the partial wind up are the result of the fact that both applicants, due to the grow in rights associated with the partial wind up, became entitled to receive unreduced pensions at 55, rather than the assumed normal retirement date of 65. Thus, as a result of benefits conferred by the grow in rules, post-partial wind up both applicants were able to, and did, retire at age 55 with an unreduced pension. Boys elected to receive his pension payable monthly. Groskopf elected to receive his pension payable as a lump sum.
[40] As a result of Newbould J.’s order, Towers Watson produced detailed calculations showing how the pension amounts above were calculated and why these calculations resulted in no supplementary pension benefit being payable to the applicants. Towers also answered numerous follow-up questions about these calculations.
[41] In essence, Towers interpreted the proviso excluding consideration of grow in benefits in determining the starting point of the Supplementary Plan equation to require the reduction of the full amount of the applicants’ pension benefits to the amount they would have received had they retired at age 55 without the benefit of the grow in rules.
[42] In Groskopf’s case, for example, this would have meant a monthly pension of $1,150, subject to the Income Tax Act limit of $1,463, such that there was no “difference” between the full pension amount and the amount payable after applying the Income Tax Act limit.
[43] A similar result was shown in the calculation of Boys’ pension.
[44] As Towers explained in an e-mail in February 2014:
Although grow-in applied to enhance the benefit entitlement under the Executive [Shoppers] Plan, to determine the benefit entitlement under section 2.24(a) of the Supplemental Plan, section 2.24 specifically states that: “Notwithstanding anything to the contrary in the Plan, the amount of pension benefit described in sections 2.24(a) and 2.24(b) above shall not be subject to any grow-in provisions as provided for in applicable provincial pension legislation”.
Because grow-in must not be considered when determining the benefits calculated in section 2.24(a) or 2.24(b) of the Supplementary Plan the reduction factor that is applied in determining these entitlements must be in accordance with the termination provision of the Executive Plan (section 12) and as such an actuarial equivalent reduction was applied.
[45] Section 12 of the Shoppers Plan deals with termination of employment and early payment of vested pensions. It incorporates by reference the provisions of s. 9 of the Shoppers Plan which deals with early retirement. In essence, s. 9 of the Shoppers Plan sets out the basis for a reduction of pension plan benefits where a member retires before reaching the threshold requirements for an unreduced pension at age 55. These provisions would, in the absence of the declared partial wind up and the resulting grow in benefits under s. 74 of the Pension Benefits Act, have governed the applicants’ pension entitlements and served to reduce their pensions upon retirement at age 55.
[46] Towers’ methodology was further explained in answer to the questions posed by Wilton-Siegel J. But for grow in, Towers explained in a letter of April 3, 2015, Boys’ monthly pension would have been $1,478 in total monthly benefits at 55. As a result of grow in, Boys actually received $2,408.74 in total monthly benefits at age 55.
[47] Similarly, without grow in, Mr. Groskopf would have received a lump sum of $337,406 from all sources as of age 55. However, as a result of grow in, Mr. Groskopf became entitled to (and actually received) a total lump sum of $514,209 as of age 55.
The Applicants’ Criticism of the Shoppers Approach
[48] The applicants argue that their monthly entitlement to a pension at age 65 was not affected by the grow in rules. They concede that grow in added significantly to the total value of their pension entitlements but argue that the reduction employed by Towers under s. 2.24 of the Supplementary Plan to reflect a retirement date at 55 is not authorized or warranted by the terms of the Supplementary Plan.
[49] The applicants maintain that only consideration of their pensions payable at age 65 properly excludes the effect of grow in from the required s. 2.24(a) calculation. This is because, they argue, they would not have retired at age 55 in the absence of the grow in benefit. Thus, by using what turned out to be (as a result of the grow in rules) the most favourable retirement dates available to them, Towers has imported the grow in benefit into the calculation of the supplementary benefit under s. 2.24 of the Supplementary Plan.
[50] As stated in the applicants’ factum:
The notwithstanding clause states that the computation of (a) “…shall not be subject to any grow in provisions…” The reasonable construction of this passage is that the calculation of (a) is to ignore the effect of grow-in on the age at which a member is entitled to an unreduced pension, such that the calculation of the pension should be based on the ‘before-grow-in’ normal retirement age of 65 versus the ‘after-grow-in’ age of 55. In other words, the member’s “full pension benefit” is to be calculated as of age 65, without regard to ITA limits or to grow-in rights of the member.
By calculating the Applicants’ ‘full amount of …pension benefits’ under (a) based on age 55, [Shoppers] is explicitly recognizing the Applicants’ grow-in rights to an early pension, which the notwithstanding clause prohibits it from doing. If grow-in rights are to be ignored as the section states, then there is no reason for [Shoppers] to assume pension commencement at age 55. It is consistent with non grow-in situations to assume a pension commencement age of 65.
[Shoppers] has based (c) on age 55 and relies on consistency with this calculation to justify the use of 55 for (a). But s. 2.24 does not require consistency, and in fact directs the opposite: it requires grow-in rights to be ignored for purposes of calculating (a) but not (c). Use of the same age for calculating (a) and (c) is not mandated by the words of s. 2.24, nor is it actuarially required that the two sections must use the same pension commencement date. [Shoppers]’s application of identical assumptions for calculating (a) and (c) fails to give the notwithstanding clause any meaning.
In addition and in any event, [Shoppers] has applied a reduction factor to the pensions payable to the Applicants at age 55 under (a). This makes no sense and belies the plain meaning of “full amount” of the Applicants’ pension benefit. Under the [Shoppers] RPP a ‘full amount’ of a pension is not available to the Applicants at age 55 in the absence of grow-in. This has deflated the value of (a) and leads to the $0 value SPB. There is no requirement in s. 2.24 or any other provision in the Supplementary Plan to reduce (a) based on the commencement date.
The purpose of the notwithstanding clause appears to be intended to protect Participants in the Supplementary Plan in the event of a partial wind up under the [Shoppers] RPP. It makes clear that the “full amount” of the Participant’s registered benefit is to be recognized for purposes of their SPB, notwithstanding the fact that their participation in the [Shoppers] RPP is terminated before their eligibility for early, unreduced pensions, and the associated rights that flow from that event. This purpose is harmonious with the fact that a Participant’s SPB is an accrued, “protected benefit.” The SPB is neither an accrued benefit, nor one that is protected, if it may be effectively eliminated because the member is entitled to an earlier, unreduced pension under the PBA’s grow-in rules.
[51] The applicants argue that the terms of the Supplementary Plan are clear and preclude the very thing Shoppers has done in this case. However, the applicants argue in the alternative that, if the terms of the Supplementary Plan are ambiguous, the contra proferentum rule applies and the ambiguity must be resolved in favour of the applicants.
Analysis
[52] When interpreting a commercial contract, the court must aim to determine the intentions of the parties in accordance with the language used in the written document. The court presumes that the parties have intended what they said. The court must construe the contract as a whole, in a manner that gives meaning to all of its terms, and avoid an interpretation that would render one or more of the contractual terms ineffective. In interpreting the contract, the court must have regard to the objective evidence of the factual matrix or context underlying the negotiation or operation of the contract. The court must not have regard to subjective evidence of the intentions of the parties, however. The court should interpret the contract so as to accord with sound commercial principles and good business sense and avoid commercial absurdity, Salah v. Timothy’s Coffees of the World Inc., 2010 ONCA 673, [2010] O.J. No. 4336 (C.A.) at para.16; see also Sattva Capital Corp. v. Creston Moly Corp. 2014 SCC 53, [2014] 2 S.C.R. 633.
[53] In this case, part of the factual matrix involves the Imasco plan and the Shoppers Plan. Supplementary benefits under the Supplementary Plan interact with the pension benefits under the registered plans. These various pension benefit components, therefore, must be regarded as an integrated whole. The provisions of the various plans establishing these benefits must, therefore, also be read as an integrated whole, not in isolation.
[54] Reading the Supplementary Plan provisions in the context of the provisions of the registered pension plans, it is clear that the Supplementary Plan was intended to operate as a top up of the benefits available under the registered plans. The need for a top up arises largely from a limit imposed on registered pension plans by the Income Tax Act. In order to attract the favourable tax treatment associated with registered pension plans, the pension benefits under registered pension plans cannot exceed 70% of the member’s income over the 12 months preceding termination or retirement.
[55] The equation for determining the amount of the supplementary or additional benefit under s. 2.24 of the Supplementary Plan, therefore, expressly excludes from the calculation of the full amount of the benefit used as the starting point (s. 2.24(a)) any consideration of the Income Tax Act limit.
[56] Of paramount importance for this case, however, is that the equation for determining the amount of the supplementary or additional benefit under the Supplementary Plan also expressly excludes from the calculation of the full amount of the benefit used as the starting point (in s. 2.24(a)) any consideration of the effect of grow in benefits under s. 74 of the Pension Benefits Act.
[57] I do not accept the applicants’ argument that the limitation imposed by the proviso in s. 2.24 is restricted to the age at which the member is entitled to an unreduced pension. The intended exclusion has, in my view, nothing to do with age. Section 2.24 establishes a relatively simple arithmetic equation to calculate the difference between the registered pension benefit - without and with consideration of the Income Tax Act limit and, because the supplementary benefit, if any, is not to operate on top of any statutory benefit created by provincial grow in rules, without and with consideration of any grow in benefit acquired by virtue of provincial legislation.
[58] The applicants only began receiving an unreduced pension benefit at age 55 because of grow in. In the absence of grow in, the Shoppers Plan would have required a reduced pension benefit for the applicants at age 55 (ss. 9 and 12 of the Shoppers Plan). This is clear from Towers’ answers to the two questions asked by Wilton-Siegel J. In the absence of a partial wind up, Boys’ monthly pension would have been $1,478 in total monthly benefits at 55. As a result of grow in, Boys received $2,408.74 in total monthly benefits at age 55. Groskopf would have received a lump sum of $337,406 as of age 55. However, as a result of grow in, Groskopf became entitled to (and actually received) a total lump sum of $514,209 as of age 55.
[59] I see nothing unreasonable or inappropriate in adopting retirement at age 55 as the basis for Towers’ calculations. That is, in fact, when the applicants decided to start receiving their unreduced pensions. That is the age at which their most favourable pension benefit scenario crystallized. Both applicants were entitled to, and received, benefits resulting from the grow in rules which enabled them to retire on unreduced pensions at 55.
[60] To ignore retirement on unreduced pensions at 55 and assume there is no entitlement to unreduced retirement benefits until age 65 ignores what happened. More importantly, it ignores the significant benefit which the applicants and their actuary admit they actually received as a result of the partial wind up and the application of Ontario’s grow in rules. It is that benefit, I find, which the proviso in s. 2.24 of the Supplementary Plan specifically requires be excluded from the calculation of the amount under s. 2.24(a) and included in the calculation of the amount under s. 2.24(c) in determining entitlement to supplementary benefits under the Supplementary Plan.
[61] In any event, the Towers approach, in which the pension entitlement at age 55 is reduced, is simply one means of excluding benefits associated with provincial statutory grow in rights from the calculation of the s. 2.24(a) starting point. Exactly the same result is obtained by comparing the lump sum values of the applicants’ pension with and without the benefit of statutory grow in rights. It is not in controversy that, on a present value basis, statutory grow in rights under s. 74 of the PBA constituted a very material enhancement of the applicants’ pensions. It is that enhancement, one way or another, which the proviso in s. 2.24 of the Supplementary Plan requires be excluded from the s. 2.24(a) calculation and not excluded from the 2.2 4(c) calculation.
[62] The applicants’ argument (as illustrated in para. 68 of their factum quoted above) appears to have confused exclusion of the effect of grow in rights with exclusion of the effect of early retirement. As a consequence of this, the applicants’ interpretation of s. 2.24 stands the provision, and its purpose, on its head. The applicants’ argument would result in them receiving a supplementary benefit in the very circumstance which s. 2.24 intended they should not; that is, a supplementary benefit calculated on top of the grow in benefit they were entitled to and did actually receive by virtue of s. 74 of the Pension Benefits Act.
[63] Section 2.24 is not ambiguous. It is clear. One calculates the full amount of the registered pension benefit excluding the Income Tax Act limit and excluding any grow in benefits. From that, one subtracts the total registered plan benefit actually earned (i.e., the pension benefits subject to the Income Tax Act limit and including any benefit from grow in). If the difference is a positive number, that is the amount of the supplementary benefit. If the difference is a negative number or zero, the supplementary benefit is nil.
[64] This interpretation is consistent with the articulated purpose of the Supplementary Plan and with the plain words of s. 2.24. The Towers methodology for calculating the entitlement (or lack of entitlement) to supplementary benefits under the Supplementary Plan, in my view, gives effect to the clear words, intent and purpose of s. 2.24 of the Supplementary Plan.
[65] When the pension benefits associated with the applicants’ grow in rights are excluded from the calculation of their pensions under s. 2.24(a), no supplementary benefits are payable under the s. 2.24 calculation.
[66] For these reasons, the application for an order declaring entitlement to supplementary benefits and to an order that the supplementary benefits be paid is dismissed.
Costs
[67] The applicants submit that this is an appropriate case for the award of costs from the pension fund whether or not they are successful. This submission is opposed by Shoppers.
[68] The decision whether to award costs from a pension fund is a matter of discretion. There are two broad inquiries relevant to the exercise of this discretion. These were described by Cullity J. in Sutherland v. Hudson’s Bay Co. Limited 2006 CarswellOnt 3095 (S.C.J.) at para. 11:
Orders for the payment of costs out of trust funds are most commonly made in either of two cases. One is where the rights of the unsuccessful parties to funds held in trust are not clearly and unambiguously dealt with in terms of the trust instrument. In such cases, the order is sometimes justified by describing the problem as one created by the testator or settler who transferred the funds to the trust. The other case is where the claim of the unsuccessful party may reasonably be considered to have been advanced for the benefit of all of the persons beneficially interested in the trust fund.
[69] More recently in Nolan v. Kerry (Canada) Inc., 2009 SCC 39, [2009] 2 S.C.R. 678, the Supreme Court of Canada approved and expanded upon these principles. First, the court should consider whether the litigation concerns the “due administration” of the pension plan. Relevant factors include:
(i) whether the litigation was primarily about the construction of the plan documents;
(ii) whether the litigation clarified a problematic area of the law;
(iii) whether the litigation was the only means of clarifying the parties rights;
(iv) whether the claim alleged maladministration; and
(v) whether the litigation did or did not have any effect on other beneficiaries of the plan.
[70] The second broad inquiry is whether the litigation was ultimately “adversarial.” Relevant factors in connection with this inquiry include:
(i) whether the litigation included allegations by an unsuccessful party of a breach of fiduciary duty;
(ii) whether the litigation only benefited a class of members and would impose costs on the other members if successful; and
(iii) whether the litigation had any merit.
[71] The Supreme Court of Canada has emphasized, however, that these factors are best understood as highly relevant considerations guiding the exercise of judicial discretion. They do not constitute a legal test, Nolan, at paras. 126-127; see also Sun Indalex Finance, LLC v. United Steelworkers, 2013 SCC 6, [2013] 1 S.C.R. 271 at paras. 250-251.
[72] These factors are reviewed in the context of this case in para. 89 of the applicants’ factum. The applicants argue that they fit within either of the two categories:
i. The Application is about the construction of the Supplementary Plan document;
ii. The litigation was caused by SDM’s failure to use clear language to support its interpretation of s. 2.24 of the Supplementary Plan, and then SDM’s refusal to clearly articulate and communicate its interpretation of s. 2.24 of the Supplementary Plan. This Court already found that the calculations and explanation of those calculations of Boys’ and Groskopf’s entitlements under the Supplementary Plan after the partial wind up (“Calculations and Explanations”) is “required information”, SDM failed to provide it, and, the Court on its own motion, adjourned the hearing and ordered SDM to provide same:
This matter is adjourned to permit Shoppers to provide required information. Shoppers is ordered to produce the calculations used to produce the amounts set out in pension information statements provided to the applicants and an explanation as to how and why the amounts shown were calculated. [emphasis added]
iii. This litigation is of benefit to all beneficiaries of the trust as it elucidates how s. 2.24, which determines how SPBs are to be calculated, functions;
iv. The Application seeks clarification regarding a difficult and nuanced area of pension law, namely, the integration of registered pension benefits and supplemental benefits;
v. The Application was the only means of clarifying the parties’ rights. The Applicants first attempted to resolve issues with SDM, directly, and then through counsel without success. Also, despite demands to do so , SDM refused to even disclose the calculations and explanations until ordered to do so by Justice Newbould on the Court’s own motion;
vi. The Applicants do not seek declaratory relief for breach of fiduciary duty or maladministration, nor have the Applicants sought damages for breach of fiduciary duty or maladministration of the Supplementary Plan;
vii. The litigation had no adverse effects on other beneficiaries of the trust fund;
viii. If successful, the Application does not impose costs on other members as the employer, SDM contributes an amount to the Supplementary Plan that will fully fund the benefits that accrue to members as of December 31 of the year prior;
ix. The Application is meritorious; and
x. The Applicants proceeded by way of Application, not action, and did not proceed with any cross-examinations. Moreover, Boys applied to the Financial Services Tribunal for his RPP issues.
[73] I am unable to agree with the applicants’ submission. While there is no doubt that the application concerns the interpretation of s. 2.24 of the Supplementary Plan, the real controversy in this case involved how to implement this provision as it related to the unique situation of the two applicants. The complications in this case arose, not from the words of s. 2.24 but from the somewhat complicated nature of the applicants’ peculiar circumstances.
[74] All of the information provided by Towers after the commencement of this litigation related, not to the interpretation of s. 2.24 of the Supplementary Plan but to the application of s. 2.24 to the applicants’ individual circumstances.
[75] This is not a representative proceeding. There is absolutely no evidence that anyone other than these applicants was or would be affected by the resolution of the main issue in this case.
[76] It may be true that litigation was the only way to clarify the parties’ rights under the Supplementary Plan but that is true of almost every contract dispute.
[77] I also find that this litigation was “adversarial” within the normally accepted meaning of that term as it is used in civil litigation.
[78] The applicants argue that their application would not have imposed burdens on other members because of Shoppers’ obligation to fund the Supplementary Plan annually. Arguments of this nature were rejected by the Supreme Court of Canada in Nolan, supra. Like Kerry in that case, Shoppers is the employer and plan sponsor of an ongoing pension plan. Shoppers is responsible for the Supplementary Plan’s solvency.
[79] If the applicants’ benefits, as sought in the application, or their costs, were paid out of the fund, Shoppers would be required to contribute more in the future than it otherwise would. The money has to come from somewhere.
[80] For these reasons, I do not think the applicants have brought themselves within either the “due administration” or the “non-adversarial” branches of the exception to the general rule that costs should follow the event. I therefore dismiss their application for costs payable from the Supplementary Plan fund in any event of the cause.
[81] Having said all that, there is much to be said for the applicants’ argument that Shoppers’ delay in providing information about the calculations involved contributed to the length and cost of this litigation.
[82] In all the circumstances, having regard to the factors set out in Rule 57, I find in the exercise of my discretion that this is an appropriate case to make no order as to costs.
Penny J.
Released: October 1, 2015
COURT FILE NO.: CV-13-1009900CL
DATE: 20150930
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Robin Boys and Gerald Groskopf
Applicants
– and –
Shoppers Drug Mart Inc.
Respondent
REASONS FOR JUDGMENT
Penny J.
Released: October 1, 2015
[^1]: Under the Income Tax Act limit, the registered pension benefit cannot exceed 70% of the member’s income during their last 12 months of employment.